Monday, November 9, 2009

The Manufacturing Crisis in the US

For decades, the manufacturing base of the United States has been shrinking as many industries have moved production overseas. This has been happening not because of lower wages and higher productivity in countries like China; but because of high federal and state corporate income taxes, often impossible environmental regulations and unionization in the US that has resulted in work rules and labor cost that are unsustainable. It really is that simple. For years many have rationalized away American manufacturing because we were going to be the "knowledge economy". In essence, the belief was that we had grown beyond making things to thinking about them and then providing services to support the needs of our people.

What many forgot is that manufacturing is the economic base of any society. And then, surprise, surprise, India began graduating millions of smart, college educated people each year fully capable of "knowledge work" done in call centers, accounting and computer programming that could easily be off-shored. So, more and more the manufacturing work was gone and now a lot of the "knowledge work" is gone too; hence our very high unemployment rate.

Today, we have real unemployment of about 17%, which includes those collecting unemployment insurance, those that are under employed working part time or in jobs below their skill set or education and/or those that have just given up looking for jobs. Obama's SwindleUS Plan has been a complete failure since very few sustainable jobs have been created in the private sector as a result of Obama's $780 Billion in pork barrel deficit spending. But the story is even bigger. The US has the among the highest corporate income tax rates in the world. As a result, companies can build factories almost anywhere else and pay significantly less income taxes on profits. This situation is so bad that a major biomedical company spent $2.3 Billion building a factory in Northern California that never opened. Rather than open and face all the taxes and regulations in California and the US, this particular firm moved to Singapore and simply wrote off the $2.3 Billion because it was smarter to do that than manufacture their products in the US.

Obama and the Democrat Socialists that control Congress are now pushing CAP & TAX that will increase the cost of energy and impose many environmental regulations that will kill whatever manufacturing remains in the US and insure that no new manufacturing plants are built in our country. What are they thinking? Obama argues that CAP & TAX will create "green jobs". Oh really!! While the designs may or may not happen in the US, the solar panels and wind turbines that Obama wants to subsidize, because they are not economically feasible today, will be made in China and other countries and shipped to the US. Those products can be made anywhere and they will not be made in the US as long as manufacturing faces punitive taxes, crazy environmental regulations and union labor and work rules that are not cost effective. And, this does not even include the increased cost that will come from Obama's HealthScare Plan.

The Unites States is at a cross road, which is the thesis in a September 21, 2009 Business Week article entitled "Can The Future Be Built in America". What Obama and the other Democrat Socialists need to understand is that the US is competing in a global economy. Increased taxes and regulations, higher labor cost and work rules that do not reflect world practices will insure that manufacturing jobs will continue to leave the US. And, unless those Americans without college degrees will all be working at Wal Mart or McDonalds, where are millions of Americans going to work if we have no manufacturing sector in the United States?

If we want to encourage manufacturing in the US, corporate income taxes must be lowered to about 20% from the current 35%. Capital gains taxes should be lowered to 10% to spur investment. We must bring energy cost down rather than increase costs by expanding all current energy sources in the US as a bridge to the future. We need common sense environmental regulations that don't make it impossible to do business in the US. And finally, labor unions need to recognize that paying someone $75 an hour fully loaded to do work that requires minimal training or education is just not realistic. If we do these things, the technologies of the future will be manufactured in the US. If we fail to do these things, we will insure the demise of the United States.

I have said to all who will listen, that "elections matter". We need to elect Conservatives who believe in Supply Side economics. The only way to grow our economy is grow the private sector. Job growth is dependent on lower taxes, smaller government and common sense regulations not stifling government programs like CAP & TAX and HealthScare. Obama and the Democrat Socialists that control Congress just don't get it and won't get it because the basis of their power is big government and big unions. So we have to boot them out of office sooner than later. 2010 is coming. Get ready to take back our country to save our country for future generations. We can do it. We will do it.

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